Amazon Kindle 2 drops price AGAIN, but many still won’t buy it

Amazon is taking an incremental approach with the Kindle 2, slashing the price bits at a time as it gains production efficiencies and economies of scale. With today’s price decrease, the Kindle 2 can be yours for $259. That’s setting the bar low and puts it underneath the Sony eReader which retails for $289.

From a buzz perspective it looks like the Amazon Kindle 2 is topping the charts still, at least from a search perspective (see chart below). But that could quickly change if Amazon stalls on expanding its inventory of Kindle-enabled books or if competitors Sony and iRex provide additional functionality beyond just reading books. The good thing is that any way you look at it these eReaders are pulling paper out of the ecosystem, which could reduce the amount of trees felled in the name of literature and learning.

Snapshot of current eReader search traffic:

The fundamental question is: do readers see enough value from a specialized device versus using something more universally useful like the iPhone or even a personal computer? Granted, neither of those solutions would provide the pleasant reading experience that a Kindle does.

Amazon is also trying to expand the Kindle 2’s appeal by enabling it’s download service more places in the world with an international version. That’s a smart move with an increasingly crowded United States market, though the company may still have a few logistics to work out with that distribution and the first units won’t ship for another 2 weeks.

The Kindle DX however stayed at the same price at $489. That will add pressure for customers in the eReader market to really justify their need for a larger screen and streamlined PDF functionality.

One problem Amazon will likely have to address at some point is the Kindle 2’s incompatibility with the ePub file format, which is an open standard that also supports digital rights management. In the future that could lead to some hesitation from some consumers who are looking to keep their book collection regardless of which eReader they use.